The Central Board of Direct Taxes (CBDT) has issued a detailed clarification on 29th September 2020, regarding the new TDS / TCS provisions set to become applicable from 1st October 2020. The provisions says that the seller of goods shall collect TCS @0.1% (0.075% up to 31.03.2021).
The points regarding the doubts and their clarifications are mentioned bellow:
Case1: Doubts on Amount before or after 1st October
Doubts have arisen about the applicability of TCS provisions on the amount received before 1st October 2020. CBDT has clarified that the provision on TCS shall be applicable only on the amount received on or after 1st October 2020.
Example: Turnover of seller in FY: 19-20 is more than 10 Crore
Amount of sale made to a particular buyer during the FY: 20-21 is Rs. 1 Crore
Buyer made payment to seller between 01/04/2020 to 30/09/2020 = Rs.90 Lakhs
Buyer made payment to seller between 01/10/2020 to 31-03-2021 = Rs.10 Lakhs
In such case, only Rs. 10 Lakhs will be valued for calculation of TCS and not on Rs. 50 Lakhs
(I.e. Total amount is Rs.1 crore and Rs. 50 lakh is the Threshold amount, by including the amount before 1st October)
Case2: Doubts regarding TCS on every transaction
CBDT clarifies that TCS provision is applicable only in cases where the receipt of sale consideration exceeds Rs. 50 Lakh in a financial year.
Example: Amount of the sale made to a particular buyer during FY: 20-21 is Rs.45 Lakhs (Which is less than Rs.50 Lakhs).
In such case, there is no applicability of TCS, as the amount of sale criteria is not met.
Further, CBDT has clarified that in order to simplify the compliance; TCS provision shall be applicable on the amount of “all sale consideration received on after 1st October 2020 without making any adjustment for the amount received in respect of sales made before 1st October 2020.
Case3: Doubts on “TCS is an additional Tax”
TCS is certainly not an additional Tax, rather it is in the nature of advance Income Tax / TDS for which, the buyer would get the credit against his actual Income Tax liability and if the amount of TCS is more than his Income Tax liability, the buyer would be entitled to refund the excess amount along with interest.
Case4: Doubts on TCS to be collected by every seller
TCS will be applicable to only those sellers, whose turnover from the business, exceeds Rs.10 ‘Crore during the FY: 19-20 & onwards.